Home Loan EMI Payment
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What is Processing Fee for Home Loan?

The home loan processing fee is the charge payable by the home loan applicant to his/her lender once the home loan application has been accepted. The processing charges for home loans are one-time fees that have to be paid by borrowers. You should never work out the cost of your home loan without processing fees. You can compare lenders and choose the lowest processing fee home loan for yourself.
 

How much is Processing Charges for Home Loan?

While some lenders charge processing fees for home loans, some do not charge the same. When it comes to home loan interest rates, you should always compare and work out the monthly repayment using an online home loan EMI calculator. In case of several lenders, the processing fees vary between 0.5% - 1% while it even goes up to 2% - 3% in some cases. Bajaj Finserv offers home loan at low rate of interest with low processing fees.

Also Read: What is the Interest Rate for Home Loan

 

Types of Other Fees & Home Loan Charges

1. Fees On Account Of External Opinion

Lenders conduct a technical and legal assessment of the property while processing a home loan application. The lending institution charges a flat fee, in this case, which the borrower is required to pay. These fees are directly payable to the advocate or technical valuer based on the nature of assistance.

Such fees may vary based on account of external opinion and are usually higher for high-value properties. This process serves two purposes:

  1. Through the technical assessment, the lending institution understands if the property is worth the value the borrower is seeking.
  2. Legal assessment, on the other hand, allows lenders to know if the property is free from any encumbrance or legal complications.
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2. Property Insurance

Opting for a home insurance cover is crucial for every borrower taking a housing loan. Usually, the cost of insurance varies between 0.1-2% of the value of a said property. Here’s an example to understand better. Suppose a borrower has opted for a home loan to purchase a property worth Rs.40 lakh and the rate of premium of 0.1%. Hence, he has to pay a premium of Rs.4,000.

Property insurance premiums can be paid as a lump-sum amount when the loan application is approved. Else, it can also be paid in the form of yearly payments.

Usually, most lending institutions offer the ease of one-time property insurance, with the premium included as a part of the loan amount.

3. Charges On Account Of Delayed Payments

Lending institutions require borrowers to pay an additional charge if they fail to pay the EMI as per repayment schedule. This delayed payment charge is usually levied on the overdue loan amount.

Delayed payment charges for home loans can be as high as 2% of the outstanding loan amount and changes every time the home loan EMI payment is missed. Although the charges due to delayed payment may seem insignificant compared to the home loan quantum, there is a downside to this scenario. All delayed payments and resulting late payment charges are reported to the credit bureau. Thus, it can adversely affect one’s CIBIL score, thereby making it harder to avail of credit products in future.

4. Incidental Charges

lending institutions require borrowers to also pay an additional charge that will act as a cover in case of any default. These incidental charges also include all expenses that arise during the process of recovering dues from the defaulting borrower. Often variably called recovery charges or collection charges, it is levied by the lender if a borrower fails to pay the EMI and his/her account goes into default. Under such cases, the lender in question might have to take action against the concerned individual; the incidental charges are supposed to cover and depend on the actual expense of the process.

5. Statutory / Regulatory Charges

Financial institutions extending housing loan products require borrowers to bear the cost of certain statutory and regulatory fees. Thereby, all applicable home loan charges on the following are to be borne by the borrower:

Stamp duty: It is the tax payable on property documents and is applied during the sale or purchase of a property.

MOD: Maintenance on Demand or MOD generally accounts for 0.1% to 0.5% of the loan amount.

MOE: Memorandum of Mortgage, involving deposit of title deeds.

Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI): CERSAI charges are fixed, ranging from Rs.50 for a loan up to Rs.5 lakh to Rs.100 for loans above Rs,5 lakh.

Charges applicable on account of any other statutory or regulatory body along with the applicable taxes must be paid (or refunded, depending on the case at hand) only by the borrower.

Home Loan Processing Fee FAQs

Is the processing fee on home loan refundable?

Home loan processing fees are not refundable. These are one-time payments and are a part of the loan application process. The home loan processing fee, however, is not fixed. It varies and depends on several factors, such as the type and amount of loan and creditworthiness and past repayment behaviour of the borrower.

How are processing fees calculated?

Home loan processing fee is a one-time payment. It is calculated as a percentage of the total amount. The processing fees may also differ based on your employment type.

What is the overdue amount on a home loan?

In simple terms, overdue amount in a home loan refers to the sum that a borrower fails to repay by the due date of payment as per the schedule. Most lenders usually charge an interest rate on the overdue amount. Therefore, it may get difficult for the borrower if he/she keeps failing to pay EMIs on time.

What is an incidental charge on home loan?

Lending institutions usually require borrowers to pay incidental charges to cover the recovery expenses in case they fail to pay EMIs on time. Under such circumstances, the borrower’s account may go into default, prompting the lender to take action and recover the outstanding loan amount. Incidental charges cover the actual expenses borne during this recovery process.